Chinese demand for premium lubes and grease products is set to continue its upward trend.
The Chinese lubes market, continued to boom through 2011, thanks to a strong demand for premium products and a growing auto sector. Last year, China imported a record 2.7 million tons of base oil, up from 900,000 tons only six years ago. Lubes and greases demand has also grown by 7% over the last decade and Frank Ye, an analyst at Beijing’s Chem1 consultancy, expects it to grow another 4% in the next five years according to Lubes Report correspondent, Boris Kamchev.
Lubricants consumption grew by just under 5% year-on-year from 6.8 million tons in 2010 to 7.1 million tons in 2011, largely driven by demand from the rapidly expanding auto sector. In 2010, diesel and gasoline engine applications consumed around half of the nation’s finished lubricants, a place which it held firmly throughout 2011. According to Chem1, although the annual average lubes and greases production rate was well over 10% increase per year since 2002, it will most likely only rise by around 4% through 2012.
Unsurprisingly, the country’s biggest lubricants suppliers were state-owned giants PetroChina and Sinopec, although between them they held only 35% of the market share. Foreign majors Shell, ExxonMobil and BP’s Castrol brand managed to garner 13% of the market share, with the remainder divided between the country’s 400-odd independent blenders, who tend to import base oils from South Korea, Taiwan, Singapore or Russia, rather than producing their own base oils.
The base oil supply-demand gap continues to widen, with China now importing around 30% of its total supply. Imports from Singapore made up a hefty 27% of these, with South Korea following closely with 25% and Taiwan 14%. Russia’s contribution fell two percent to seven percent last year, largely due to disputes over prices and supply issues.
Overall, Ye expects the quality requirements for lubricants to increase, with “high viscosity index, low sulphur, low volatility, low pour point, high anti-oxidative stability and high additives response” becoming increasingly important characteristics, according to the Report. This should be good news for Russia as it increases its Group II and Group III capacity from its current 40,000 to 1.33 million tons.